with William Edgar, Chairman, Subsea UK
What was the vision behind the creation of Subsea UK?
Subsea UK as it exists today was established in 2004 by the former UK Department of Trade and Industry (DTI) and Scottish Enterprise. Previously, a very small association representing subsea companies existed, but it was decided that it was the moment to create a real focal point for the entire UK subsea industry. Membership ranges from the big operators, contractors, to small niche enterprises. The vision was to bring together all the subsea companies across the supply chain in order to provide a united front to the government, the industry, and overseas players.
Originally funded by DTI and Scottish Enterprise, Subsea UK is now a self-sustaining organization which obtains its income from member subscriptions and events. We have grown from 25 companies in 2004 to 170 at the present time, and are expecting to end 2008 with about 200 members.
Subsea UK brings together the whole subsea-related supply chain in the UK – operators, contractors and suppliers. How difficult is it to represent such a diversity of companies which may have common general objectives but different specific interests?
Although Subsea UK‘s members are of very different sizes and represent different parts of the value chain, there are a number of common points which bring them together. The first is the need to break into new overseas markets and to ensure that in the world’s offshore provinces there is full awareness of the UK‘s subsea community. In addition, it has taken us 30 years to develop subsea expertise and establish the current supply chain. All of this experience has been acquired in the very hostile environment of the North Sea, and it is important for companies in the UK to showcase their abilities to the rest of the world. All of our member companies benefit from valuable services such as the website where they have the opportunity to give a detailed description and communicate their products and services.
Our main objective is to increase the business opportunities for our members, particularly in export markets, given the fact that the North Sea is a mature province with declining output. Although there is still a considerable amount of reserves in the North Sea, subsea companies are aware that to continue growing they need to export. Subsea UK supports them in this endeavour, with the advantage of bringing together operators, contractors and their suppliers. We are therefore truly able to speak on the behalf of the entire value chain.
Which would you highlight as the organization’s main achievements since its creation?
Subsea UK‘s flagship event, bringing together the whole subsea community, is held every February. It is the very well attended, and is probably the biggest subsea conference and exhibition in Europe. In 2008, we had 200 people participating in the conference, over 600 guests at the Subsea Awards dinner and over 100 companies exhibiting, drawing in around 1500 people. The networking events held in the framework of this conference were also a huge success.
Subsea UK also organizes important events overseas. Recently Subsea Asia was held in Kuala Lumpur, Malaysia, supported by the national oil company Petronas. 250 attended the conference and the exhibition was visited by 1800 people. Another event we are involved with is Subsea Europe, which has been done in the past in Paris due to the city’s links with West Africa, but this year it will be held for the first time in London in October. These conferences and exhibitions giver our member companies the opportunity to present their technology and do some networking, which is particularly appreciated by the smaller players.
In addition, Subsea UK carries out a lot of studies on topics suggested by our members. For example, we did an extensive study on the availability of subsea test sites around the world which has proved useful to our members.
What is the economic importance of the UK subsea industry, and how big is its participation in the worldwide subsea sector?
Our current estimates are that 40 000 people are employed in the UK‘s subsea industry, which was worth about 9 billion dollars in 2007 (+29% on 2006). Well over 50% of the UK‘s subsea products and services are exported. The global subsea market is estimated at about 25 billion dollars, so the UK certainly has an important share and is a leading global player. There is no reason to believe that the global market won’t continue growing at rates of around 20% over the coming years. For the last decade and into the foreseeable future, the main markets will remain those forming the ‘global triangle’: Brazil, Gulf of Mexico and West Africa. However, Asia is also emerging with many interesting deepwater prospects and Malaysia as the most likely regional subsea hub with Petronas.
How are companies addressing the critical shortage of skilled workforce which is threatening the subsea industry’s continued growth? How much of a problem is it today, and how does Subsea UK help them face this challenge?
The subsea sector is not exempt from the challenge of skill shortage which has been affecting the entire oil and gas industry for several years. Many companies have had to delay projects just because there are not enough human resources to execute them. There are estimates showing that over the next two to three years the UK subsea industry will be 2000 engineers short for our needs. Subsea UK does what it can to help our members overcome this situation, notably through a ‘skills forum’ which is held four times a year. In the forum, the heads of human resources from the bigger member companies meet up in order to discuss workforce issues and try to develop a common approach as an industry, instead of just letting companies deal with the problem individually. Subsea UK‘s role is thus to create the opportunity to allow our member companies to work together to find solutions to common problems.
In addition to the skills forum, the organization has also created a special section on the website where companies can post their vacant positions. Subsea UK is also active in local schools, visiting students in order to explain the industry so as to encourage them to realize the advantages of a career in engineering, in particular subsea. Companies have also created conversion programmes in order to access skilled people from other industries. In this regard, Subsea UK has developed an on-line learning conversion course together with Robert Gordon University, giving the fundamentals about subsea engineering and technology for people who wish to come into the industry.
How important is the role that subsea firms will play in further boosting output in the mature UKCS?
One of the main characteristics of a mature oil province is that reservoirs get smaller and smaller over time. In order to get production from these puddles, they have to be brought together and tied back to the existing infrastructure; otherwise it would not be economical to exploit them individually. Already over 50% of UKCS oil production is delivered through subsea wells, and in a few years this is expected to rise to 60-70%.
This is why subsea has become a major part of the not only the UK‘s offshore oil and gas industry, but a very big global business as well. The world’s biggest concentration of subsea companies is being established in Westhill, a district just west of Aberdeen, earning it the reputation of SURF (subsea umbilicals, risers and flowlines) City. The world’s biggest subsea contractors Technip, Acergy and Subsea 7 are there, concentrating about 5000 subsea engineers, making it a global subsea hub for the industry. Aberdeen and its surroundings have become the main operational headquarters for the subsea industry, with people doing subsea works around the world all reporting back here. It is important to emphasize the incredible figure of 95% of the global subsea construction fleet is managed from Aberdeen and Westhill.
What is Subsea UK’s strategy in order for the industry to remain the dominant force in the global subsea sector throughout the next wave of emerging technologies and services?
20 years ago, the UK subsea industry got support from the government which helped us pioneer technology and gain an edge over the rest of the world in this area. If we are to maintain our leadership in the next wave of subsea technology, we will need to develop a new range of subsea technologies. Subsea UK has called for the establishment of a subsea centre of excellence and Aberdeen University, Robert Gordon University, and Dundee University have agreed to work together in order to develop a subsea research institute as well as offer Master Degrees in subsea engineering.
The government’s support is going to be fundamental to get our subsea ambitions off the ground. Subsea UK has been working hard to get this message across to Westminster, highlighting the importance of the subsea industry to the UK economy. Hopefully we have planted a few seeds there, we are very expectant to see what results of these efforts.
To what extent are subsea companies diversifying their technology from oil and gas to other areas such as renewables?
Subsea UK also has the facility, upon members’ interest, to arrange talks and events in relation with markets other than oil and gas, in particular marine renewables. Most people initially believed that wave devices would be the first source, but tidal stream technology has actually being moving much faster than anything else. In fact, very recently we were able to generate the world’s first ever grid electricity from tidal stream. The subsea industry is very well qualified to expand into this sector, but it has not done so yet to a large extent. Clearly, subsea oil and gas companies today are so busy with their core business that it is very difficult to get them to dedicate significant time and resources to new areas. There are a few exceptions, notably Rotech which has become quite involved with marine renewables. Despite their current level of activity, we continue at Subsea UK to talk to members about the importance of diversification and the existing opportunities beyond oil and gas.
How successful would you say that the UK’s subsea companies have been in going international?
The UK has a fairly large number of companies recognized as global leaders in different subsea applications, such as JP Kenny (of the Wood Group)|, MCS, Dominion Gas Technology, Tritech, and BEL Valves, just to name a few. The UK subsea industry, much like the UKCS, is at a mature stage so there is a lot of consolidation happening and companies are becoming more international. The main problem in this regard is that some UK companies are so busy in the local oil and gas market, that they are not looking overseas as aggressively as they could. But it is a risky attitude, because this is a cyclical industry and eventually business activity will drop and international competition for contracts will be tougher. At Subsea UK we have access to some very experienced and internationalized companies which can provide a wealth of lessons learned for those players just starting to venture abroad.
What are the main advantages that UK subsea companies have vis-à-vis other subsea industries around the world?
Our main advantage is the 30 years of experience, building from generation to generation of engineers actually working and living in Aberdeen, which is invaluable. Aberdeen is a center of subsea academic excellence which is growing; there is also a subsea cluster in Northeast England. We have a certain weakness compared to Norway and the United States due to the fact that the UK does not offer equivalent support to national subsea technology programs. However, companies have also turned this into a strength because they have grown and had to succeed in a very competitive environment, unlike the very protected industry in Norway, for example. This has allowed UK companies to be more resilient and competitive in international markets.
What is the importance of enhancing Aberdeen’s reputation as a global centre of excellence for subsea oil and gas?
It is essential that we retain our position within the global oil and gas industry, and to do so we need to act quickly or within 3 years the UK could lose its leadership in new subsea technologies. In this regard, the creation of a government-backed subsea research institute is of the highest importance.
What is your final message to the readers of Oil & Gas Financial Journal?
I would first of all like to address young people, to tell them that this is a very exciting and vibrant industry, with a large international dimension, and full of opportunities which they should take advantage of. Secondly, I would again send the government the message that the UK subsea industry needs public support, particularly with the subsea research institute in order to maintain our technological edge in the future.